Claude Monet, The House on the
River Zaan, 1871. Stedel Art Institute, Frankfurt-on-Maine.
In the old days, before computers and the
internet, the multiple listing services (MLS) publicized real estate listings with a
printed weekly book, distributed to all members. Oh yes, you had to be a
member to get one. And, like today, this was the most valuable information
in real estate: "What's for Sale." In fact, for a potential buyer,
short of actually driving every street looking for yard signs, getting the for
sale list from the MLS book was the best and easiest way to find listings. And
of course, the ONLY access to the book was through, you guessed
it - a member real estate agent. So, if you wanted to find out what was for sale - like it
or not, you had to 'hire' an agent.
Stay with me here....
Think about the consequences of this arrangement.
The agent was SO in control of the situation. For better or worse, the
buyer client only saw what the agent deemed appropriate. Sure, there was a
lot more driving around back then. But obviously the agent held much more
'control' over their dependent buyers under this arrangement.
Then and now, real estate
agents compete with and cooperate with each other. We compete for business
and cooperate to get deals done. In the old system, if
I am a real estate agent, what is the most important factor in my ongoing
livelihood? Fighting for my client OR making nice with other real estate
agents? Well, regardless of how strongly one fought for their client, the
number one goal was making sure that the other agent(s), the 'cooperating'
agents, found you 'easy to work with'. No Kidding! And too often,
'easy to work with' was a euphemism for 'agreeable to our terms'. If you
fought too hard for your client, the other agents might deem you simply 'hard to
And this was perceived as the kiss of death.
Why? If most or all information is
exclusively in the hands of real estate agents, their clients cannot find
listings without their agent - maybe even, your listings. So, not only
were clients dependent on their agent, agents themselves, were dependent on other agents.
The mindset was: If an agent deems me 'hard to work with,' then they will
not show my listings. I had better play nice. And, I don't mean
'nice' like your grandmother taught you. I mean, the reality was
that an agent cared more about getting along with other agents than they did
about taking care of their clients.
Why? Because they were scared of being blackballed!
Did this happen - Oh, you bet! If an agent
was deemed 'hard to work with' by others, well agents would simply not show
their listings. And, the buyer's had no way of knowing that this was
happening. There was little
'discovery risk' for the buyer's agent. If
the 'hard to work with' agent had potential buyers, listing agents would not
return phone calls, make listings unavailable, fail to counter, etc.
For the most part, technology and the internet
has, thank God, put an end to this nonsense. And blackballing? - Gosh, we
could not care less. If we have a property listed, and especially if we
offer a competitive buyer-side commission, other agents had better show it - God
help them with their clients if they do not! Any agent blackballing any
other agent or their listings runs a huge risk of ticking off their own clients.
'Discovery risk' is high! The clients no longer need the agent to find out
what's for sale.
Still with me....? So why are we discussing
Because, there is a remnant of this system that
just does not seem to fade. What remains is the attitude among real estate agents that it is more
important to get along with other agents than it is to fight for your own
clients. And by 'get along with' I do NOT mean nice and pleasant.
To this day, agents are loath to approach real
estate negotiations and transactions like the six-figure business deals that
Real estate has long been dominated by the country
club set. These people care more about their peers than they do about
their clients. Now, as a young, aggressive, business-minded firm, we do
not care about the hang-ups of other agents. We are strong, professional
advocates for our clients, and this is the only reputation we care about.
Good agents on the 'other' side (and there are a few) recognize this and respect
us for it. Funny thing, these deals always go smoothly. But, many
agents find us 'hard to work with'. Tough.
Question: As a client or potential client,
what kind of agent do you want working for you?
Pittsburgh-Plus Real Estate Commissions
Back in it's heyday, US Steel coerced steel
consumers to pay freight charges based on production in Pittsburgh to the
customer's location, regardless of where the steel was actually produced. So for
example, if a customer in Raleigh ordered steel from a manufacturer in Richmond,
the customer was charged freight based on shipment from Pittsburgh. Nifty
trick, as you can imagine freight charges for steel are rather high. This
was called Pittsburgh-Plus pricing and was eventually killed by the FTC as
What does this have to do with real estate
commissions? Well, please consider the similarities of the following
Steel Freight Charges:
Customer pays set fee of X representing the
shipping-distance between Pittsburgh and customer regardless of actual shipping-distance
required by customer.
Traditional Real Estate Commissions:
Customer pays set fee of X representing a given
service-level between agent and customer regardless of the actual service-level
required by customer.
Trader Joe's to Open in Cary November 27th
"Two Buck Chuck" coming to town later this month.
Opening now set for November 27th - You heard it here first!
FWIW, they opened in New York City in March of
this year. Here is what the New York Times
had to say about it.
How to Sell a House in the Triangle Market,
And, Do You need a Real Estate Agent to do
What follows is a cheat sheet for sellers.
Believe it or not, this list is controversial. Why? Because the
items that fall into our categories, "Might Do" & "Total Waste," are often the
very reasons other real estate agents use to justify high, outdated commission
The items under "Must Do" are pretty
straightforward and each item is vital. In regard to the question:
Do I need a real estate agent? The answer is simple: If you can
accomplish each and every item under "Must Do," on your own, then you do not
need an agent. Often it is NOT a question of if you can (You Can!), but
rather do you have the time and the inclination to do all of these things?
At the end of the day, hiring a real estate agent is less a question of
necessity and more a question of convenience.
The real estate business is rife with
little secrets. Here's one no one wants you to know:
Transferring ownership of real property is not difficult, it's just
complicated. You don't need a real estate agent in the way that
you need a surgeon – someone to do for you what you could not do for
yourself even if you had his decades of schooling. You need
an agent in the way you need an auto mechanic or a computer programmer –
someone who does for you things you could do for yourself, if you
had the time, the knowledge, the resources and the experience.
Real estate agents are not magicians, reciting mystical incantations
they have sworn to keep secret from you. We are simply specialists
at effecting real estate transactions. We can't do your job as
well as you do it. And you can't sell your house or buy another by
yourself as easily and painlessly as you will with us.
We don't always agree with Mr. Swann, but in our
estimation, he is one of the most forward-thinking (and articulate) real estate practitioners in
We have more to say about real estate agents and
their 'marketing plans' below. But first, here is our list:
Correctly price the property.
Let potential buyers know it is for sale.
Prominent, conspicuously-placed yard sign.
Place property, including high-quality photos, in the MLS and every other online
vehicle you can think of.
Use flyer box to distribute more information on
property to passers by. And, DO NOT let it sit empty.
Compensate buyer agents.
Make property available for showings at any time.
Use a showing/lockbox system so any buyer's agent
can show property at any time.
Measure the house and produce an accurate diagram
of the property.
Place disclosures, survey, property diagram, and
etc. in the house so potential buyers can take with them.
Note, sellers love this, but think of
it from a potential buyer's point of view: Do they really want to
visit a different site for each house? Sure, they might like this - But only AFTER they have selected the house.
Listings-focused real estate agent web logs.
Email Campaigns (Yes, real estate agents actually
spend a lot of time and money on this - everyone else calls this SPAM).
Clown-mobiles - Silly painted or 'wrapped' cars.
As a rule, real estate agents offer these 'services' to
sellers because they sound good - Not because they work! An agent will
simply use your property to market themselves and you get to pay for it.
Real estate agents love to talk about their
'Marketing Plan' as if this concept is going to lead to a successful sale of
your property. Well, Mr. or Ms. Seller, be leery. The overwhelming
majority of buyers out there are just as smart as you are (and certainly as
smart as most real estate agents) and will simply not be
"sold". Buying a house is not like buying a timeshare. Most people,
certainly most of our buyers, realize that this is a six-figure transaction and
it must meet their most basic wants and needs.
Real estate agents want you to believe that they
are great at selling houses. Don't believe it! What they are
really good at is selling themselves to potential clients with the illusion that
they are great at selling houses. But, if you are a
serious seller (that is, you do or allow all the things in our "Must Do" list), once the
agent has you as a 'client,' the sale is usually a foregone
conclusion. Many quite successful real estate agents are not so great at
the details of brokering real estate transactions. But they are excellent
at converting potential clients into clients. Keep in mind, we all need a
place to live, preferably one we own. Or, when it is time to sell, we
often do not have a choice. Real estate agents know this. So, the
trick is not selling property. The trick is collecting
So, in the end, what does "sell" the buyer?
Well, the house itself, of course! The role of a good real estate agent is
to be an advocate for their client and to drive the transaction forward.
For savvy clients, real estate today is not a sales business. Rather, it is a professional
As Henry Abbott pointed out on
True Gotham (see our post just below), much of what happens [in the real
estate business] is
scandalously terrible. Why? How does this happen?
Scandalously terrible, as in illegal? Or, a breach of ethics? Or, a
breach of the agent's fiduciary duty? All of the above?
Well, in our opinion, it all comes down to
transparency, or we should say, lack of transparency. We would like to introduce a concept to this web log which
we will use going forward:
Discovery Risk: The risk that an
agent's scandalously terrible action(s) will be discovered by their
While it is bad enough that real estate agents
might inflict injury on non-principal customers and others in the business, the
party often suffering the greatest injury by these actions is the agent's own
Is this Site Anti-Real Estate Agent?
True Gotham has a great post on the mission of their blog.
Although it's published, and largely
written, by a working Manhattan broker, TrueGotham was never about
buying and selling property. (In fact, there has never been a
single link or description on TrueGotham to any of Doug's properties.)
On the contrary, TrueGotham was born with a clear mission to help build
trust between real estate consumers and their real estate professionals.
That makes TrueGotham a rarity:
reports from an experienced voice inside the industry that is not afraid
to admit that a whole bunch of what happens here is scandalously
added by Triangles)
This reminds us of something we read a while back:
The Porous Membrane. Starting with the concept that "Markets are
conversations," Hugh MacLeod does a
great job of describing just what we are trying to do here. Read the whole
thing! Pay particular attention to
number nine. This is the problem with traditional real estate firms today.
Our site mission: Elevate the real estate
We are not anti-real estate agent!
Everyone affiliated with this site is, in fact, a real estate agent. This
site, and more generally, our firm, are simply trying to elevate the
'conversation'. The fact that many agents are turned off by what we have
to say just demonstrates the need, as does the table below.
Who is your Buyer's Agent working for, anyway?
It's bad enough that builders are offering Buyer's Agents commissions as high as
8% (or more), now comes this from the Wall Street Journal:
Las Vegas builder American West is
offering agents a $15,000 bonus to sell homes in its Glen Eagles
development, provided they come in with a full-price offer within 30
days. The bonus drops to $10,000 for negotiated offers and those that
take longer. "The goal is to try to push them to make a full-price
Promote yourself as "Full Service" only
and remind potential clients that,
"You get what you pay for"
Sign Exclusive Agency with Seller and
charge them six percent
Hold Open House
Meet & greet any potential Buyers
Sign Exclusive Agency with
Sell Buyers (some other) property (and
Wait for (some other) agent to
sell your listing
Get Paid Again!
Congratulate Seller for being so very smart
Ask Seller for Testimonial Letter and
The Federal Reserve Bank of San Francisco reports:
From the homeowner's point of view, the
decisions of whether, when, and how to purchase a home are important, as
they significantly affect the household's balance sheet and other
financial decisions. In 2004 primary residences accounted for 32%
of total family assets, and the debt secured by those residences
accounted for 75% of total family debt. Paying back mortgages and
home equity loans can be a significant burden on households; for
example, the median household in 2004 with any property debt devoted 17%
of its pretax income to servicing that debt. The home's importance
as an asset has been especially visible during the recent run-up in
house prices, as homeowners have tapped into the increased equity in
their homes to boost consumption.
Three recent reports highlight the Research
Triangle Area and North Carolina. See the CityVitals report from Joseph Cortright, the Richard Florida report,
"The University and the Creative Economy," (below) and Site Selection's Business
Climate Report (also below).
From Joseph Cortright, in partnership with CEOs
Urban leaders seeking success in the new
economy should stop paying attention to ubiquitous city rankings and
start focusing their attentions on four dimensions of success: talent,
innovation, connections and distinctiveness.
...examines the role of the
university through the lens of the
'3-Ts' of economic analysis and
finds that, "the university
comprises a potential - and, in some
places, actual - creative hub that
sits at the center of regional
development. It is a catalyst
for stimulating the spillover of
technology, talent, and tolerance
into the community." No wonder
real estate investors are showing up
on the quad.
Richard Florida, Gary Gates, Brian Knudsen, and
From the Introduction:
Most who have
commented on the university’s role in the economy believe the key lies
in increasing its ability to transfer research to industry, generate new
inventions and patents, and spin-off its technology in the form of
startup companies. As such, there has been a movement in the U.S. and
around the world to make universities “engines of innovation,” and to
enhance their ability to commercialize their research.
Site Selection Magazine's Business Climate
Lately, there has been a great deal of discussion
on the value proposition of real estate firms and agents. For the most
part, this has focused on the cost side of the cost/benefit analysis.
Angie's List has added a category for Real Estate Agents.
For those of you unfamiliar with Angie's List:
From their website:
Angie's List is a word-of-mouth network
for consumers. It's a growing collection of homeowners' real-life
experiences with local service companies. The people who join
Angie's List are like you — looking for a way to find trustworthy
companies that perform high-quality work. Rather than digging
through the phone book, they check Angie's List to find out what people
in their area are saying about the companies they've hired.
How to Get Yourself on Our Blogroll:
Rage, rage against the dying of the light
Our firm does not set a standard charge for
listings. Each agent negotiates the fee on a case-by-case basis.
Potential clients ask: So, what do you charge? And typically, our
answer is: Well, what do you want us to do? This makes all the sense
in the world to us and our clients in this increasingly competitive market.
Lately we have noticed more competition on the Buy
Side. Traditionally, buyer's agents, like listing agents, have been paid a
percentage of the sales price. Today, agents are increasingly willing to
provide buy side services for a flat fee. If the buy side is, in fact,
paid a percentage of the sales price, the buyer's agent refunds any amount over
the flat fee to the buyer at closing. Good enough. But, what is this
service worth? We suspect, in time, the answer will turn out to be the
same as it is for listings: Well, what do you want us to do?
Now, we show property. Tons of it. As
buyer's agents, we want to help our clients meet their wants and needs (and yes,
get paid for doing so).
But, there is a trend in the emerging flat fee
buyer's agent world towards not showing property. Want us to
represent you and charge you a flat fee. Fine, just let us know when you
have found a property and we will get to work. Oh, you actually want to go
inside before you decide? Really?!? Must you? Well, call the
listing agent and make an appointment. Don't forget, the listing agent
represents the seller and WE represent you. Oh and not to worry, we can
represent you just fine without seeing the property!
The point is, to get the flat fee and rebate the
buyer has to take on some of the work traditionally done by the agent.
That's okay, it's the same thing that has been happening on the list side for some time now.
Perhaps if the flat fee is high enough it
could include a certain number of showings. That might work. But,
then there would need to be a "per showing" fee if the number of showings goes
over the allotted amount. And of course, it would!
Anyway, what is full service buyer agency worth
These guys will do it for $5,000 ("You will get full-service
representation – except for the part about being squired around town for weeks
in a luxury towncar."). And, believe us, you will get excellent
service - They are far ahead of the market in terms of knowledge and business
these guys will do it for as little as $2,000. Locally, so will
So, what's it worth? Well, what exactly do you want
us to do again?
Real Estate 20/80 Revisited
We all know the old marketing 20/80 Rule: 20
Percent of your customers will purchase 80 percent of your product. Now,
we do not know the veracity of this maxim, but in our experience it is pretty
accurate. But this rule never really applied to the real estate business.
Rather, we had our own version: 20 percent of the real estate agents sell
80 percent of the property. This has been true for over a generation and
But for how much longer? These days a new
rule is developing and we would like to propose it here: 80 percent of
real estate agents chase 20 percent of the market. This is the 'golden'
twenty percent who still believe that "you get what you pay for" in a real
estate transaction. Silly Sods. But alas, they are still out there,
cheerfully paying six percent. After all, their agent drives a Lexus, so
she must know what she is doing, right? Now we could say so much about
this, and we have and will continue to do so, but here, we are much more
interested in the corollary to our proposed rule: 20 percent of real
estate agents chase 80 percent of the market. Minor adjustment: (Not
yet) 20 percent of real estate agents are chasing (what will become at least) 80
percent of the market.
These are the new breed agents and
firms that understand it is a new day in the real estate marketplace. Is there a place for
old-line traditional models and pricing in real estate today? Of course.
But today, the real estate business is finally segmenting like other industries.
Pick just about any other business and you will find multiple service levels and
price points. For several reasons, technology among them, real estate is
just getting to this point.
Some believe that the traditional models will prevail on service alone.
there are those who believe that, going forward, there will be no place for
the pricey traditional models. We believe that real estate is a huge
market and there will be winners and losers in all segments. But we
would like to remind readers, agents and clients alike, that more people shop at
Macy's than at Saks. It's not that Saks is not a profitable endeavor,
surely it is. It is just that all stores cannot be Saks. And, for
what it's worth, the last time we checked, Macy's was more profitable than Saks
anyway. Oh, and let us not forget: Wal-mart is now the world's
If I were to
sell real estate, I would use my ugliness to
my advantage. No one trusts beautiful people
anyway, especially when large sums of money
are involved. My real estate motto would be
“I’m hideous and I haven’t starved to death
yet, so you know I must be good!"
Like any editorial medium, this website promotes a
particular view of a given topic, in our case, today's real estate business.
For a well-written opposing view, see:
Real Estate Agents just LOVE Print Media
But, we would remind them:
We are not totally sold on the YouTube-on-WebLog
phenomenon, but this
Dan Green and Team hit on this idea after The
Yellow Pages came calling. But have you seen the real estate section in
the newspaper lately? It keeps expanding, though surely the audience is
shrinking. Why? Because these agents do not know how to market
today's world. And, the agents have to "do something" to justify their
These ads do incredibly little to market property.
If anything, they do an okay job of promoting the agents, themselves, (yes, just
okay - what's the target market anyway?). Sellers should ask themselves
what they are paying for. Do you want to market your property or promote
some out-of-date real estate agent? Unless you are marketing Florida condos
to New York retirees you might want to question the medium...and the agent.
A Critical Assessment of the Standard,
Traditional, Residential Real Estate Broker Commission Rate Structure
Institute - Brookings Joint Center for Regulatory
While real estate brokers have long set their fee as a straight
percentage of a home’s sale price, this formula is an anomaly
and a primary reason why such fees may be inflated by more than
$30 billion annually. Although competitive pressures
ordinarily produce a fee structure reflecting costs, real estate
broker commissions are strangely unrelated to either the
quantity or quality of the service rendered or even to the value
provided. Rather, this fee has been based solely on the
price of the home. (It is as if tax preparers set their fee as a
flat percentage of a client’s gross income, irrespective of how
difficult the return was to prepare or how much their efforts
saved the taxpayer). Oddly, not only is there no evidence
that it is any more costly to sell higher-priced homes than
median-priced properties, but it is possible that the opposite
may be true! Furthermore, the straight percentage fee
formula creates little incentive for real estate agents to
provide home buyers or sellers with additional value.
View Full Report
Interesting comments about this from the author, Mark Nadel, and
here. Fellow broker's perspective
here. Appraiser's perspective
We wrote in a piece below (Get Out!!!) that
sellers often get in the way of their own sale. In our experience, the
Listing Agent is just as often an obstacle. Like much in this business,
this argument sounds counter-intuitive. An example....
In our market, the most common occurrence of this
phenomenon is for the listing agent to advise their client not to counter.
I cannot count the number of times we have had a listing agent say to us:
The seller found your offer insulting, so insulting in fact, that we are not
going to offer a counter. Come again....? Offer insulting???
Question: Is there such a thing as an "insulting offer"? Maybe, but
it would have to be fairly frivolous, right? Yet, we get this all the time
on serious, albeit aggressive, offers. Where does this 'insultedness' come
from anyway? Believe me, if someone wants to purchase your property,
whatever the price, you are not naturally insulted. No, the seller is only
insulted because his or her listing agent told them they should be.
Let me quote from our Broker Recruitment Page:
Failure to Counter When you represent the
seller, do you believe it is ever reasonable to advise your client not to
counter? Perhaps, but we see this far too often in our market.
Ninety-nine percent of the time, this is simply pedestrian advice from a non-business-savvy real estate
agent. Seller insulted? Only
because their agent told them they should be.
Yes, of course we recognize that buying or selling
a "home" is a personal, at times emotional, transition for many people.
And, real estate agents must be sensitive to this. However, it is our job,
I would argue, our duty, to provide our clients with solid, objective advice.
That is, after all, why they are paying us! The client may or may not heed
this advice. But if you cannot provide it, you are doing your client a
So, what should the listing agent advise
her clients to do?
Well, counter high of course. If we ultimately reach an impasse, so be it.
But, let's at least have a look at what's around the corner!
Welcome to Carrboro
Triangle municipality with highest tax rate:
Carrboro ($1.7159 per $100). Combined city & county total - See:
Orange County Tax Chart.
That's a whopping 62% higher than Cary ($1.054 per
$100) and 60% higher than Raleigh ($1.069 per $100). Highest municipality
in Wake County, Garner, at $1.209.
Wake County Tax Chart.
Do Carrboro citizens get 60% greater
Is there a relationship between a
municipality's tax rate and the shabbiness of a community?
We Sell Houses
Here at Brick & Garden, we sell
- land, townhouses, condos, houses, etc. Yes, Houses! We have
noticed a trend over the last generation towards real estate agents no longer
selling houses and condos, but rather
"homes." It's okay really - they are simply selling the
intangibles. No different than your car company selling an image.
Lifestyle marketing. Think
J. Peterman does real estate. Good marketing? Absolutely. But, does it
serve the best interest of the client? Well....
Of course, we understand that every house we
sell will become someone's home. Many clients do, in fact, hire us to find
the "perfect home." However, for
too much 'home' is a bad thing. Why? Because it is our job, as
agents, to remain objective and provide sound advice to our clients. We are not saying that clients
cannot or should not become emot...ehr, make that 'less-than-objective' about a
home. Actually, it's quite wonderful when clients fall in love with a property. But
whether buying or selling,
clients should be able to rely on their agent for objective advice and
level-headed, non-emotional negotiation. It is
the agent's job to protect the interest of their
principals. Anything less
is a disservice. Clients and potential clients should be leery of agents who go overboard on the "home talk."
At the end of the day,
we supply the house, but the client...makes it a home.